Predictions for Monday, page-133

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Tumbleroll

3,495 Posts.

26/02/16

21:36

Post #: 17130432
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Originally posted by mike8654 ↑

Christopher - your guess will be worth as much as anyone's, qualified accountant or not until monday. SGH is a company in transition - only issue is that no-one knows exactly what it is transitioning to.

If you want to study the form over the weekend, the accounting standard is I think that goodwill should be reassessed every year. SGS goodwill in the Group's June 2015 accounts was $999.7M. When they do the re-assessment, they are supposed to do a forward estimate of the present value of future cash flows from the SGS business. If that figure is less than $999.7M they are supposed to write down the goodwill to the present value figure.

But there is wriggle room with these things - like what discount rate is used etc, so all a bit subjective.

I agree it would seem very unlikely that the whole lot would be written off after 6 months of ownership. But if SGS is going to run at a cash flow loss or just break even in 2016 year, then it would be likely that the auditor will want a substantial write off - unless the auditor is Mel's cousin, and believes Mel when he says that NIHL will produce rivers of cash in 2017 financial year.

With WIP the situation should be less of an issue. There could be "stale" WIP like SHJ had, which needs to be written down in value. And WIP may also be affected if SGH is moving closer to the new accounting standard for WIP calculation. In 2015 they calculated WIP in different ways depending on the type of work it was, so they might try and simplify all that and make it more transparent.

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It's mid morning in the UK. Surely only a matter of hours now until the story begins to emerge...

SGH Price at posting: 83.0¢ Sentiment: Hold Disclosure: Held
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